It predicts a total reduction in government employment of around 710,000 by the first quarter of 2017, compared with a previous estimate of 400,000 by 2016.

The rise in the state pension age to 67 will also be brought forward a decade to 2026.

Mr Osborne committed to plans to make Cardiff one of 10 “super-connected” cities – on top of the previously announced £57m to support super-fast broadband across Wales. He signalled that he wanted to address the Severn crossing tolls, which are due to increase to £6 in the new year.

And there some comfort for cash-strapped commuters when the chancellor announced the scrapping of the 3p-a-litre rise in fuel duty due in January.

Responding to the Chancellor's Autumn Statement, First Minister Mr Jones said the UK Government's plans for the economy did not go far enough.

He said: "There is no escaping the economy is close to returning to recession.

"The Chancellor says his plan aims to bring down public debt, but his own figures show borrowing and debt will be higher than previously forecast and will take longer to repay.

"The books won’t be balanced before the next general election and austerity in public spending will continue until at least 2016 or 17.

"This paints a worrying picture of the outlook for Wales and the challenge we continue to face in delivering public services and protecting the economy."

Mr Jones insisted his administration has been pressing the UK Government for more action to boost the economy and increase investment for the past 18 months.

He added: "This response falls short of what is needed. It is good that the Chancellor has recognised the importance of infrastructure, an argument we have repeatedly made and on which we have made marked progress."

However, the First Minister welcomed the extra £216 million, saying it would be important as his government developed its Wales infrastructure investment plan.

"I am pleased the Chancellor has committed to working with us to improve the M4, bring about extra capital investment, credit easing to help small businesses and the extension of the business rates relief.

"But I am afraid it is not enough and it should have been done earlier.

"The proposals outlined are simply not the right combination we need to create the growth we desperately need.

"The clock is ticking and the Chancellor does not have the luxury of sticking to his plan as people lose their jobs and incomes are squeezed."

Welsh Conservatives however, said the Welsh Government needed to stop whingeing and get on with its job.

"The people of Wales will now expect the Welsh Labour Government to end its culture of whingeing and start taking responsibility for its own spending.

"Welsh Labour ministers have the levers at their disposal and now, additional funding, to invest in our nation’s infrastructure and drive economic growth in Wales."

But Save the Children in Wales described the impact on families as “dire”.

Spokesman James Pritchard said: “Today's announcements are dire news for the poorest families – both in and out of work – who have seen core benefits they depend on cut in real terms. For many families the scrapped £110 increase in child tax credit could mean the difference between putting food on the table for their children or having them go hungry.

“Children from low income families, whose parents rely on working tax credits to make work pay will be worse off as a result of the Chancellor's announcements. Child poverty in the UK is predicted to escalate in the coming years and the chancellor 's decisions today will only exacerbate the situation.”

Shadow Welsh Secretary Peter Hain said: “Families, pensioners and businesses across Wales know it’s hurting, but now who know it isn’t working either. The OBR’s forecasts today show the Government is set to borrow £158bn more than they planned a year ago – the bill for their economic failure and higher unemployment hitting Wales disproportionately hard.

“Trying to go further and faster has been utterly self-defeating.”

Welsh Secretary Cheryl Gillan defended the Government’s position, saying: “Today’s Autumn Statement will have a strong impact on Wales. The Welsh Government will receive an additional £216m capital and I would encourage them to use this additional funding to enhance growth opportunities.

“We are committed to building a strong, stable business climate and as part of the growth measures we have announced businesses across Wales will benefit. The National Loan Guarantee Scheme will allow banks to offer lower cost lending to Small and Medium Enterprises.”

“Now that Welsh Government has announced enterprise zones in Wales and I hope that they will also follow the UK Government in respect of business rates, with additional support for Small and Medium sized businesses.”

“This year the Wales Office highlighted the concerns of rural and agricultural businesses with our Rural Economy Taskforce report, so the fuel duty inflation increase being cancelled will be welcome news. As is Cardiff being one of the 10 super-connected cities as a result of the Urban Broadband Fund, which is in addition to the £57m already announced for superfast broadband across Wales.

“Wales needs these measures which have a critical impact on the survival and sustainability of small and rural communities. Today’s measures including a 5.2% increase in basic state pension will benefit 600,000 pensioners and there will be more opportunities for young people to take part in work experience.

“I am also pleased to see the measure to ease tax pressure in businesses, under the Seed Enterprise Scheme. This is a pro-business statement and a healthy addition to an already generous settlement for Wales.”

Plaid Cymru Treasury spokesman Jonathan Edwards said: “The independent OBR’s growth figures provide evidence of a stagnating economy, with forecasts for 2011 and 2012 slashed. This is the result of the Conservative and Liberal Democrat coalition making the wrong economic call and arguing that debt and deficit were more important than growth and jobs.

“We have disagreed with that argument throughout the economic crisis since it first began in 2007, and have consistently called for substantial counter-cyclical measures to get people into work and out of the Jobcentre. The Con-Dem’s austerity cuts have led to little growth but higher unemployment.”

Lynn Hine, a partner with PricewaterhouseCoopers, said: “The public sector recession is now in full swing. Public sector employees will feel the squeeze further next year after today’s announcement on the 1% cap on public sector pay rises.

“As we expected, public sector pay restraint and departmental savings will continue beyond the next election due to the impact on the UK public sector of the greater than expected debt burden recognised by the Chancellor today. Public servants will continue to be asked to deliver more for less and, with the growing pressure on health and care services from an ageing population, this represents a long term double whammy which requires real and lasting change.

“To bring about lasting change, Government will have to push ahead with its ambitious plans to open up the delivery of public services to the private sector and social enterprise.

“The figures announced today underline the reality of the situation facing the country, that the money to pay for pensions, services and benefits must come from somewhere. To get public support, the government must make it a priority to communicate this reality to everyone, including public sector employees and those who rely on public services.”

Unite General Secretary, Len McCluskey said: “George Osborne is like a pilot, who has put his plane into a tailspin, and is now wrestling desperately with the controls as the aircraft rapidly loses height. At long last, the message seems to have half got through to the Chancellor of Exchequer that his deficit reduction programme has brought us to the front door of a double-dip recession in early 2012 – as predicted by the OECD yesterday.

“This has been further compounded by today’s Office for Budget Responsibility’s announcement which shows growth flatlining at 0.7% in 2012. With no growth, there is no agent for renewed economic activity and the extra jobs that growth engenders.

“Now George Osborne is scrabbling around to put together a semblance of a programme to inject much-needed demand and spending power into the beleaguered economy that has been brought to its knees by his hardline austerity measures – but there are serious flaws in the new proposals.

“What is worrying is that the majority of cash is earmarked to come from institutional pension funds and the Chinese government sometime in the distant future and yet to be agreed. Also, an extra £5bn will come from further cuts in Whitehall spending departments – this is not ‘new’ money, but ‘recycled’ cash already in the system.

“The Chancellor is determined not just to raid public sector workers’ pensions, but their wages as well, with the news that public sector pay will be capped at one per cent for two years, once the current pay freeze ends. His much-vaunted capital projects will be paid for from the wages of working people who are being squeezed and squeezed again, as they driven into desperate financial straits. The City has got off again scot-free.”

PCS general secretary Mark Serwotka said: "It’s time for the Government to do a complete U-turn... This will have a devastating impact on the economy and communities across the UK.

"The Chancellor has also announced further attacks on workers, with a derisory public sector pay increase of 1%, well below inflation and a massive real terms pay cut. By bringing the rise of the state pension age to 67 forward to 2026 the Chancellor has also sent another pension shock to public sector workers already reeling from the fact they will have to pay much more for far less in retirement.

"As the Government plans to link public sector pensions to the state pension age - this means that everyone under 50 will have to work a further year for their pension. It gives public sector workers even more determination to strike ahead of the mass action tomorrow."

He continued: "The Government has launched further attacks on workers, announcing changes to TUPE regulations and eroding health and safety legislation. which is bad for everybody. This is on top of making it more difficult to bring an employment tribunal against bad bosses.

"It's the people who are paid the least who are having to pay the price. The chancellor says it is fair for taxpayers but seems to forget that these low-paid workers pay their taxes and spend money in the economy too.

"If people are losing their jobs in tens of thousands and pay is frozen there is little money to spend and the economy doesn't grow. The austerity plans aren't working.

"The Government worships at the altar of the markets and is only interested in short-term gain. Once again the public sector is being made to pay for the crisis caused by the banking sector.

"The economy is heading back into recession. If the Government was serious about turning the economy round it would invest in collecting the £120bn in avoided, evaded and uncollected tax."